Both we and others have shown that mice with a null mutation of the homeobox gene Hhex die mid-gestation with multiple developmental defects, including complete absence of the liver (REF). The early lethality and absence of liver bud formation makes analysis of the role of Hhex in later stages of liver development and function impossible. We have shown that Hhex is expressed throughout liver development and in the adult liver in hepatoblasts, mature hepatocytes and both intra- and extra-hepatic bile duct epithelia (BDE), indicating that Hhex plays a role at multiple stages of liver morphogenesis (REF). To determine the role that Hhex plays in liver development after the formation of a liver bud, we generated mice a "conditional knockout" of Hhex. Using two strains of Hhex conditional knockout mice, we have demonstrated that Hhex has important functions after the formation of the liver bud. First, we found that Foxa3-Cre;Hhex?2,3/- mice, in which Hhex is deleted in early hepatoblasts at E8.5 - 9.0, die by E18.5 and have a liver that is significantly hypoplastic and composed predominately of bile ducts with a paucity of hepatocytes. Second, we found that AFP-Cre;Hhex?2,3/- mice, in which Hhex is deleted in the liver at E10.5 and later, have ductal plate malformations and polycystic livers. Based on the striking features of these two mouse strains, we hypothesize that 1) Hhex is required for the normal segregation of hepatoblasts into hepatocytes and bile duct epithelia (BDE); 2) enlarged bile ducts and biliary cysts develop in the absence of Hhex because Hhex is required for ductal plate remodeling and/or the normal development and function of BDE in the mature liver; and 3) Hhex regulates the expression of a number of liver-enriched genes during liver development and biliary cystogenesis. Those genes include the critically important HNF family members HNF6, HNF1a and HNF4a as well as other factors. In order to test these hypotheses, we propose the following 3 specific aims. Specific Aim 1. To determine if alterations in Hhex expression levels in hepatoblasts perturbs their normal differentiation into hepatocytes and BDE. Specific Aim 2. Determine the mechanism(s) involved in the formation of enlarged bile ducts and biliary cysts in Foxa3-Cre; Hhex?2,3/- and AFP-Cre; Hhex?2,3/- mice. Specific Aim 3. Elucidate the transcriptional network regulated by Hhex during liver and biliary tract development. The developmental mechanisms elucidated by these studies will provide knowledge that is critical to the identification of genetic factors required to generate differentiated cells for cell therapy of liver diseases. Additionally, this research will shed important insight into the pathogenesis of diseases of the biliary tract, including biliary atresia and polycystic liver disease.